Legal & Regulatory Feature

The LD in DC

Jessica Mehta • Wed, April 19th, 2017

Getting the low down on healthcare happenings in Washington, D.C. helps prepare us for challenges—and sometimes, a few sweet surprises.

On April 6, 2017, the House Rules Committee approved an American Health Care Act (AHCA) amendment to create a “federal invisible risk-sharing program.” At first, naysayers suggested the rush job of this last minute approval was really just for show. However, on April 12, 2017, President Trump re-affirmed his commitment to “repeal and replace” the Affordable Care Act (ACA) before tackling tax reform. “I have to do healthcare first, I want to do it first to really do it right,” he said. However, no concrete steps to repeal and replace have happened yet.

Proposed IPPS Payments

The Centers for Medicare and Medicaid Services (CMS) released proposed changes for the 2018 budget year’s Inpatient Prospective Payment System (IPPS) with key recommendations for orthopedics and total ankle replacement (TAR) in particular. Total payment increase to hospitals are proposed at a whopping $3 billion for next year.

ACA “Fixes”

On April 13, 2017, CMS also unveiled their final rule to help ACA marketplaces stabilize. The new, tighter rules shorten 2018’s enrollment period, ups flexibility of benefit design, and streamlines the administrative process. It’s a step in the right direction, but many are underwhelmed, including America’s Health Insurance Plans (AHIP). “There is still too much instability and uncertainty,” said AHIP in a statement. “Health plans and consumers … need to know that funding for cost-sharing reduction subsidies (CSRs) will continue uninterrupted.” There’s a lot of momentum to fund CSRs, but it’s still uncertain whether the funding will be approved during the 2017 spending extension in late April 2017.

April Showers

It’s a busy month for Medicare, with the Medicare Payment Advisory Commission (MedPAC) unanimously voting to approve changes to Part B drug reimbursement. Now, Medicare has negotiating power for drug costs under Part B. Full changes will go into effect by 2022. Commissioners are also angling to modify the payment formula, which currently allows physicians 106% of a drug’s cost.

Instead, MedPAC wants to require drug makers to report their average sales price (ASP) and then make a rebate payment to Medicare once ASP passes a certain level. Ultimately, this may decrease program costs by up to $270 million in just one year. Program spending can save up to $5 billion in a five-year period. However, Pharmaceutical Research and Manufacturers of America (PhRMA) released a statement saying the MedPAC changes may “have a detrimental impact on access for patients who rely on Part B therapies to treat serious and complex conditions.”

MedPAC isn’t the only one under fire. Scott Gottlieb, M.D., nominee to head the Food and Drug Administration (FDA), faced off against the Senate Health, Education, Labor and Pensions (HELP) Committee during an April 5, 2016 nomination hearing.

He was grilled about his ties to the industry, his character, and current processes for approving new drugs. Dr. Gottlieb was also quizzed on the opioid crisis in the U.S., the 21st Century Cures Act, and drug pricing. He adamantly declared that he would make impartial choices steeped in science, leaving politics at the wayside. Among his top priorities, Gottlieb ticked off approving generic drugs and battling the opioid epidemic, all while encouraging the FDA to be more flexible and responsive. Gottlieb’s nomination will be confirmed or denied on April 24, 2017.

Dr. Gottlieb’s nomination isn’t the FDA’s only hot ticket item. On April 14, 2017, the FDA released a discussion draft regarding the agency’s user fee agreements. Although a number of influential people, including President Trump, urged the FDA to discuss drug prices in the draft, that prickly problem was largely unaddressed. There’s no trace of drug pricing policy riders. Instead, there’s a new approach to complicated generic drugs, a new biosimilars review model, and more resources for the FDA’s breakthrough drug pathway along with additional bells and whistles. For now, strategizing on drug prices with user fee reauthorizations is on the back burner—and that’s exactly how bipartisan committee members seem to like it.

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Winners and Losers: CMS’ Proposed Ortho Reimbursement

Jessica Mehta • Mon, April 24th, 2017

The Centers for Medicare and Medicaid Services (CMS) released proposed changes for reimbursement procedures on April 14, 2017. Although currently “just” a proposal, any secured changes will take effect in August 2018 for the 2018 budget year. Under the FY2018 Inpatient Prospective Payment System (IPPS) proposal, there are a number of suggestions that may impact orthopedics, including changes to total ankle replacement (TAR) reimbursement.

The proposed changes target diagnosis-related groups, or DRGs, which come into play with acute care hospital inpatient cases via Medicare Part A for hospital insurance. Every case is designated a DRG, which in turn has a payment weight linked to it based on averages. One of the biggest proposed changes for FY2018 is an “increase in operating payment rates for generate acute care hospitals” to an average of 1.6%, up from the current 0.95% average.

However, not all changes are treated equally. There’s a proposed 1.4% decrease for orthopedic and flattish supplies from the 2017 budget year. There’s also a proposed decrease for the following DRGs:

360 fusion by 17.0%.

Hip/knee replacements 0.2%

Spine fusion by 3.6%,

Vertebroplasty/kyphoplasty by 15.9%

One area of orthopedics is enjoying a proposed increase in reimbursement payments—artificial discs at an increase of 0.9%.

CMS welcomes comments for the Proposed Rule through June 12, 2017. It’s very possible that final rates will differ from proposed rates, and input from medical professionals can make a big difference. CMS can, and often does, make changes to DRG reimbursement every year based on a number of factors including changes to the Affordable Care Act. Comments can be submitted online at https://www.regulations.gov/.

Failure to Repeal Obamacare Good for Device Industry

Walter Eisner • Fri, April 7th, 2017

The failure to repeal and replace the Affordable Care Act (ACA) with the American Health Care Act (AHCA) was a good thing for medical device companies.

Wells Fargo Analyst Larry Biegelsen offered that assessment on March 29, 2017 after hosting a conference call with investors and Vince Ventimiglia, a former Republican congressional staffer and assistant secretary for legislation at the Department of Health and Human Services. Ventimiglia is currently vice chairman of Leavitt Partners.

Procedure Volumes

Biegelsen's logic is simple and based on anticipated procedure volumes. He cites the Congressional Budget Office analysis of the AHCA, which predicted that 14 million to 24 million people would lose their insurance to pay for procedures between 2018 and 2026. This would have negatively impacted procedure volume in the U.S.

As James Carville might have said, “It’s all about the volume, stupid.”

But now what?

Ventimiglia told Wells Fargo's investors that while Obamacare will stay in place, the administration can make changes through various rulemakings, executive actions and smaller legislative efforts to address specific provisions in the ACA. Some changes could be to modify risk adjustment formulas and the medical loss ratio (MLR) definitions, tightening special enrollment period (SEP) controls to stabilize risk populations, continue cost sharing reduction (CSR) funding and other steps to shore up health insurance exchanges (HIE).

Health Exchanges

What about the Presidential Tweets predicting the collapse of the individual state healthcare exchanges?

Ventimiglia pointed out that 25-30 states have stable exchanges with respect to enrollment churn, plan options and the makeup of networks. He said it is possible these states will increase enrollment in 2018. For states with unstable exchanges like Tennessee, a fix is needed or insurers are likely to exit in 2018.

Medtech Device Tax

Ventimiglia said a repeal of the device tax has bipartisan support but finding the source of funding and a legislative vehicle may be difficult in the current environment. A one- to two-year delay of that tax is more likely while Congress searches for a vehicle for permanent repeal.

Device Tax Hits $1 Billion

Walter Eisner • Wed, July 24th, 2013

The 2.3% medical device excise tax required by the Affordable Care Act aka "Obamacare, " has cost device companies an estimated $1 billion since the start of the year.

That's according to a July 15, 2013 report from three Washington, D.C.-based lobbying groups, the Medical Imaging & Technology Alliance (MITA), the Advanced Medical Technology Association (AdvaMed) and the Medical Device Manufacturers Association (MDMA). The figures were not verified by the Internal Revenue Service.

The Republican-controlled House of Representatives has voted dozens of times to repeal Obamacare and the tax and the Democrat-controlled Senate overwhelmingly passed a non-binding resolution last month to repeal the tax.

The tax requires device manufacturers to pay an estimated average of $194 million per month in medical device tax payments (with a payment of approximately $97 million due semimonthly). This tax, according to the industry lobbying groups, threatens a medical device industry that helps employ 2 million nationwide, generates approximately $25 billion in payroll, pays out salaries that are 40% higher than the national average ($58, 000 vs. $42, 000) and invests nearly $10 billion in research and development annually.

Tax Impact Disputed

The device lobbying groups and Wall Street analysts have not seen eye to eye on the impact of the tax.

On April 1, 2013, Wells Fargo analyst Larry Biegelsen issued an analysis which showed the cumulative benefit to U.S. volume surgical procedures due to Obamacare will increase 3.6% by 2022 and will likely offset the 2.3% medical device tax under the new healthcare law.

Biegelsen estimated the increased healthcare coverage of tens of millions of newly insured patients represents a 1.5% tailwind to U.S. volumes across 10 key device categories in 2014, the first year coverage is expanded.

Smaller manufacturers have told us that the tax has hurt them because the tax is on revenues not profits.

Dr. Price Leavin’ On a Jet Plane

Walter Eisner • Thu, October 5th, 2017

Tom Price, M.D., the orthopedic surgeon and Secretary of Health and Human Services, resigned on September 29, 2017, after seven and a half months on the job.

According to the New York Times, President Trump "berated" Price in the Oval Office for about two hours on the day of his resignation because he didn't like the "optics" that Price spent almost $1 million on private chartered and military jet travel.

Price, a former Georgia seven-term congressman, had been the Republican architect of Repeal and Replace Obamacare as chair of the House Budget Committee. Trump then brought him into the Administration in a failed effort to kill off Obamacare for good.

During a joint public appearance earlier in the year, Trump rhetorically asked Price if he was going to get the votes to repeal Obamacare. Answering his own question, Trump said, "He better get them, otherwise I'll say, 'Tom you're fired'."

First, Do No Harm

Despite failing to repeal the Affordable Care Act, Trump and Price, through administrative rulemaking powers, unsettled insurers in the healthcare exchanges with uncertainty about continuing government subsidy payments to insurers for the "working poor." The result was double-digit premium increases in many areas.

They also postponed certain mandates on employer coverage and scaled back the open enrollment period for signing up for insurance under the law.

The Congressional Budget Office (CBO) recently estimated that insurers expected to “raise premiums for marketplace plans in 2018 by an average of roughly 15%, largely because of uncertainty about whether the federal government will continue to fund cost sharing reduction (CSR) payments and because of an increase in the percentage of the population living in areas with only one insurer.”

CBO notes that insurers have withdrawn from healthcare exchanges, spurred, at least in part, by “uncertainty about the enforcement of the individual mandate, and uncertainty about the federal government’s future payments for [CSRs].”

Price, the Orthopedic Surgeon

The last time Price gowned up for a stint in the OR was in the late 1990s.

Price was born in Lansing, Michigan, and grew up in Dearborn, where he attended Adams Jr.

Bipartisan Teasing for a Permanent SGR Fix

Walter Eisner • Tue, March 24th, 2015

April Fools Day is almost here. That’s the day a mandated 21% cut to fees paid to physicians by Medicare is mandated by the sustainable growth rate (SGR). Congress has not acted. While commonly called the “doc-fix, ” it’s really a Medicare “beneficiary-fix.” Cutting money to pay for senior health services will hurt seniors, not physicians who can stop seeing Medicare patients or go to work for health systems.

Congress got teasingly close to a permanent fix to the much maligned formula last year, but ultimately failed.

This year, the news out of Washington, D.C. is that Republican House Speaker John Boehner and Democrat Minority Leader Nancy Pelosi have agreed on a deal to permanently replace the formula that mandates the cut to physician fees. A vote on the House floor is expected before Congress goes home for a two week spring break.

Who Pays?

Reports are that while agreeing in principle and price for a permanent fix, there is no agreement on how to pay for it or agreement with the Senate on linking the fix to an extension of the Children's Health Insurance Program (CHIP). All 12 Democratic senators on the Senate Finance Committee have already gone on record suggesting they will oppose the House plan unless there is a four year CHIP extension. House Republicans are only agreeing to a two-year extension.

The permanent fix would cost about $210 billion over a decade. Of that amount, about $35 billion would be offset by raising the amount that upper-income seniors pay for their care under the program. A similar sum would come from changes in reimbursements to a variety of providers such as hospitals.

That leaves about $140 billion of the bill's cost uncovered, which would add to the federal deficit. The latest report from AP on March 24 said Republican House staffers say Republicans want to pay for the SGR fix by cutting payments to Medicaid. Medicaid pays for healthcare services for the poor.

Whose Ox Gets Gored?

AARP, the senior citizens' lobby, said the package "is not a balanced deal for older Americans."